To boost growth and guard against a slump the RBA is likely to cut the official cash rate to 2.75% in the next six months, starting with a 0.25% cut either next month or in November. 

A mining sector collapse triggering near recessionary conditions in Australia, a crash in house prices and problems for banks is not our base case but cannot be ruled out. However, Australia has plenty of firepower to combat such a scenario by slashing interest rates and allowing a sharp fall in the $A to $US0.80 or below.

Meanwhile in Australia, the run of soft economic data continues with employment falling by 8,800 in August. Jobs growth over the past year has been just 62,000 or 0.5%, which is well below the 160,000 jobs that would normally be required to stop unemployment from rising.

To read this edition of Oliver’s Insights, click here.

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